ViaCyte raises $10.6 million

San Diego  ViaCyte, a developer of a diabetes treatment from human embryonic stem cells, has raised $10.6 million in a private equity financing.

The money will go to ViaCyte’s therapy for type 1 diabetes, the privately held company said Wednesday.

ViaCyte said the financing included its largest existing investors: Johnson & Johnson Development Corp., Sanderling Ventures and Asset Management Co. The cash infusion represents a matching investment to a $10.1 million grant from the California Institute for Regenerative Medicine, the state’s stem cell agency.

ViaCyte’s product, called VC-01, contains cells derived from human embryonic stem cells. These cells mature into the insulin-producing pancreatic cells destroyed in type 1 diabetes. The cells are enclosed in a semipermeable screen that protects the cells from the immune system, allowing them to receive nutrients and secrete insulin.

The device has been tested in animals, and ViaCyte is preparing to begin human clinical trials Assuming all goes well, ViaCyte could start by the first or second quarter of 2014, said Chief Executive Paul Laikind.

Only a few companies in the United States have used embryonic stem cells in clinical trials. Most use other kinds derived from nonembryonic sources, such as umbilical cord blood. This is in part because embryonic stem cells can form tumors, so extra safety testing is needed. In addition, many people morally oppose the use of embryonic stem cells.

Laikind said no embryonic stem cells remain in the implanted device. But as a further safety precaution in animal testing, the device was filled with embryonic stem cells. When tumors formed, they were detectable through medical imaging, and the device could be easily removed.

California’s stem cell agency was authorized by voters in 2004 to speed up development of stem cell therapies, especially the embryonic kind, with $3 billion in bond money.